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ID Watchdog Announces Results for the Second Quarter 2016

DENVER, Aug. 4, 2016 /CNW/ --

Employee Benefit revenues increased 144.3%

Total revenues increased 96.9%

Gross profit increased 100.7%

ID Watchdog, Inc. (TSX VENTURE: IDW) (PINKSHEETS: IDWAF) ("ID Watchdog" or the "Company"), provider of consumer-facing identity theft protection and resolution services, today announced its results for the 2nd quarter ended June 30, 2016. All amounts are in U.S. dollars.

2nd Quarter 2016 Highlights:

Revenue: Revenue totaled $2,552,390 for the second quarter of 2016, an increase of $1,256,125, or 96.9%, from the second quarter of 2015. Revenue from our Employee Benefit Channel increased $1,323,855, or 144.3%, from $917,519 for the three months ended June 30, 2015 to $2,241,374 for the three months ended June 30, 2016.

Gross Profit: Gross profit increased by $973,717, or 100.7%, from $966,980 during the second quarter of 2015 to $1,940,697 during the second quarter of 2016. The gross margin rates for the second quarter of 2016 and 2015 were 76.0% and 74.6%, respectively.

Operating Income: For the second quarter of 2016, operating income improved by $53,740 to $190,859 as compared with $137,119 for the similar period in 2015.

Adjusted EBITDA: For the second quarter of 2016, adjusted EBITDA improved by $317,088 to $476,229 as compared with $159,141 for the similar period in 2015.

Cash Balances: Cash and cash equivalents as of June 30, 2016, totaled $2,246,527, an increase of $1,177,238 from our cash balances at December 31, 2015.

Third Quarter 2016 Updated Guidance

Three Months Ended September 30, 2015 --Actual

Three Months Ending September 30, 2016 --

Guidance

Change

vs.

2015

Employee Benefit Revenue

$1,001,814

$2,225,000 to $2,275,000

122% to 127%

Total Revenue

$1,377,583

$2,475,000 to $2,525,000

80% to 83%

Gross Margin

$1,000,287

$1,800,000 to $1,850,000

80% to 85%

Operating Income (1)

$186,047

$140,000 to $190,000

(25%) to 2%

Adjusted EBITDA

$211,150

$300,000 to $350,000

42% to 66%

(1)

The potential decrease in operating income projected in the third quarter of 2016 is due to a projected $131,000 increase stock-based compensation expense.

ID Watchdog CEO, Michael Greene, stated, "We are pleased to report solid operating and financial performance in the second quarter of 2016, resulting in record second quarter revenue and Adjusted EBITDA of $2,552,390 and $476,229, respectively. We continue to experience exceptionally strong growth in our Employee Benefit Channel where revenue grew by over 144% driven by our robust January 1, 2016 employee enrollments."

Mr. Greene continued, "As we look forward to the third quarter of 2016, we anticipate we will increase our Employee Benefit Channel revenue by 122%-127% over the prior year quarter, deliver gross margin around 72.5% and an Adjusted EBITDA margin of approximately 13%. We remain highly confident we will exceed our goal of $10 million in revenue for calendar 2016."

ID Watchdog, Inc.

Consolidated Statements of Operations

Three Months Ended

June 30,

Six Months Ended

June 30,

2016

2015

2016

2015

Revenue

$ 2,552,390

$ 1,296,265

$ 5,125,065

$ 2,565,951

Cost of revenue

611,693

329,285

1,296,028

676,934

Gross profit

1,940,697

966,980

3,829,037

1,889,017

Operating expense:

General and administrative expense

512,222

377,673

1,108,621

708,899

Benefit broker commission expense

586,910

220,954

1,189,898

436,858

Sales and marketing expense

365,336

209,212

722,486

421,831

Share-based compensation expense

268,729

11,066

295,998

25,359

Depreciation and amortization expense

16,641

10,956

31,808

21,168

1,749,838

829,861

3,348,811

1,614,115

Operating income

190,859

137,119

480,226

274,902

Other income (expense):

Interest expense, net

(103,529)

(300,368)

(266,554)

(532,874)

Litigation provision

(142,414)

—

(182,222)

—

Gain on warrant liability

—

—

317,709

199,659

(245,943)

(300,368)

(131,067)

(333,215)

Net income (loss) and comprehensive income (loss) applicable to ordinary shares

To supplement the Company's consolidated financial results presented in accordance with International Financial Reporting Standards ("IFRS"), the Company reports "Adjusted EBITDA" (net income (loss) before deducting net interest expense, income taxes, depreciation and amortization, share-based compensation, litigation provision, and gain (loss) on warrant liability) and uses this metric to measure the performance of our business. Adjusted EBITDA is not a performance measure defined under IFRS and is not considered an alternative to income from operations or net earnings (loss) in the context of measuring the Company's performance. Adjusted EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other publicly traded companies. Adjusted EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, income taxes, interest payments, capital expenditures, debt principal reductions and other sources and uses of cash, and is not meant to be considered in isolation or as a substitute for financial information prepared in accordance with IFRS.

Financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent quarterly reports and our annual report. These documents are available online at www.sedar.com and in the "Company Overview" section of our website at www.IDWatchdog.com.

About ID Watchdog, Inc.

ID Watchdog was founded in 2005 and is headquartered in Denver, Colorado. The Company provides three-tiered comprehensive monitoring, detection and resolution for identity theft. ID Watchdog proactively detects identity theft problems at their source and provides immediate resolution services to ensure complete peace of mind for individuals. All the Company's services have been developed with input from industry experts; national consumer advocacy groups; federal, state, and local law enforcement agencies; consumer protection agencies; and adhere to guidelines published by the Consumer Federation of America. For more information, please visit www.IDWatchdog.com.

Forward-Looking Statement

This press release contains opinions, forecasts, projections, and other statements about future events or results that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and financial outlook and forward looking information within the meaning of applicable Canadian securities laws (collectively, "forward-looking statements"). All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. Such forward-looking statements include, but are not limited to, statements about: future revenue and the growth of revenue including growth from our Employee Benefit Channel; anticipated expenditures; our business strategies; our ability to grow in both the near and long term and the funding of our growth opportunities; the plans, objectives, expectations and intentions of the company regarding revenue growth; the Company's financial position including liquidity and financial capacity, and the future development of the company's business.

The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance Company's filings with Canadian regulators at www.sedar.com. Furthermore, the forward-looking statements and financial outlook contained in this release are made as at the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements and financial outlook, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.